The Canadian Life and Health Insurance Association Inc. (CLHIA) is urging the federal government to provide insurance companies with greater flexibility to invest in technology and to commercialize these innovations in its submission to the Department of Finance Canada's review of the federal financial services sector.
Specifically, the CLHIA lauds the steps the government is taking to clarify and modernize the framework around the type of technology activities and investments that insurers are permitted to undertake. The CLHIA suggests that the life insurance industry could benefit from expanded capability to invest in technology.
"Greater investment and partnerships with fintechs and other innovative firms will allow life insurance companies to better serve our customers and meet the changing preferences and demands of the Canadian marketplace," the group's submission states.
Although insurers are investing in technology increasingly to make their businesses more efficient and to meet changing client expectations, they're restricted from selling or licensing this technology to companies outside of the financial services sector under the current framework, the association notes.
"Insurers should be permitted to commercialize innovations outside the realm of financial services," the CLHIA's submission recommends.
As examples, the CLHIA suggests that if an insurer had developed an online game to promote financial literacy, or a tool to facilitate compliance with anti-money laundering legislation, the company should be able to license those products to a third party for commercialization.
The CLHIA also calls for more flexibility in the legislation to take into account the rapid pace of technological change. Under the current framework, insurers must receive written approval from the federal finance minister prior to making certain technological investments.
"The process to seek Ministerial approval can be slow and cumbersome, which can be problematic given the rapid pace of new technology," the CLHIA's submission states. "In order to encourage innovation in a timely manner in the financial services sector, the industry recommends a carve-out for fintech, whereby insurers do not require Ministerial approval prior to engaging in innovative activities."
The CLHIA also provided commentary and recommendations on certain other aspects of Finance Canada's review. Specifically, the association urges the government to provide more flexibility to encourage investment in infrastructure and to implement changes to promote diversity on boards of directors.
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